Gold, bonds, and epidemics: A safe haven study

Tonmoy Choudhury; Harald Kinateder; Biwesh Neupane

doi:10.1016/j.frl.2022.102978

Gold, bonds, and epidemics: A safe haven study

Financ Res Lett. 2022 Aug:48:102978. doi: 10.1016/j.frl.2022.102978. Epub 2022 May 16.

Authors

Tonmoy Choudhury¹, Harald Kinateder², Biwesh Neupane³

Affiliations

¹ IRC for Finance and Digital Economy, KFUPM Business School, King Fahd University of Petroleum and Minerals, KSA.
² School of Business, Economics and Information Systems, University of Passau, Innstrasse 27, Passau 94030, Germany.
³ Department of Finance, University of Birmingham, Edgbaston, Birmingham B15 2TT, United Kingdom.

Abstract

The COVID-19 pandemic raised the question whether gold and sovereign bonds are a safe haven during epidemics. We study the effectiveness as safe haven during the epidemics caused by SARS, Ebola, Zika, Swine Flu, and COVID-19. To this end, this study employs a DCC-GARCH model to analyze the conditional correlations between daily returns of S&P 500 and MSCI Emerging Markets Index with gold and the major sovereign bonds. Our results show that gold is a weak safe haven for stock market investors during the epidemics, and U.S. treasuries are the safest option, followed by Japanese sovereign bonds.

Keywords: COVID-19; DCC-GARCH; Ebola; Gold; Pandemics; SARS; Sovereign bonds; Swine flu; Zika.